There will be increased and more complex web-hosting requirements. This no-action letter has given rise to what practitioners refer to as the rule of three, which provides that, where voting and investment decisions regarding an entitys portfolio are made by three or more persons and a majority of those persons must agree with respect to voting and investment decisions, then none of those persons individually has voting or dispositive power over the securities in the entitys portfolio and, thus, none of those persons will be deemed to have beneficial ownership over those securities. Paul Hastings has an arrangement with an outside vendor to make EDGAR filings for our clients, and would be willing to do so as requested. Officers of the public companys parent(s) or subsidiary(ies) are deemed officers of the public company if they perform such policy-making functions for the public company. A reporting person that is an Exempt Investor is required to file its initial Schedule 13G within 45 days of the end of the calendar year in which the person exceeds the 5% threshold. Copyright 2023 Paul Hastings, LLP. In June 2022, the SEC adopted rule and form amendments that require electronic filing of all Forms 144 on EDGAR. The initial report would be due within 1 business day of exceeding the notional threshold and an amendment would be due within 1 business day following any material change to the information in a previously filed report (including a change equal to 10% or more of a security-based swap position). Under Section 13 of the Exchange Act, reports made to the U.S. Securities and Exchange Commission (the SEC) are filed on Schedule 13D, Schedule 13G, Form 13F, and Form 13H, each of which is discussed in more detail below. Individualized outreach to large holders should be a priority. For example, a direct or indirect control person of a securities firm will not qualify as a Qualified Institution if more than 1% of a class of an issuers Section 13(d) Securities is held by a private fund managed by the firm or other affiliate because a private fund is not among the institutions listed as a Qualified Institution under the Exchange Act. Under Regulation NMS, an NMS Security is defined to include any U.S. exchange-listed equity securities and any standardized options, but does not include any exchange-listed debt securities, securities futures, or shares of open-end mutual funds that are not currently reported pursuant to an effective transaction reporting plan under the Exchange Act. Most of the "less retail-focused" information now in prospectuses and shareholder reports would be required to be on mutual funds' websites and also filed with the SEC on Form N-CSR. During the cooling off period, the reporting person may not vote or direct the voting of the Section 13(d) Securities or acquire additional beneficial ownership of such securities. The information about the company required in an Exchange Act registration statement is similar to what is required in a registration statement for a public offering. [18] Under Rule 14Ad-1, a reporting manager exercises voting power when it votes or influences a vote. If your company has registered a class of its equity securities under the Exchange Act, shareholders who acquire more than 5% of the outstanding shares of that class must file beneficial owner reports on Schedule 13D or 13G until their holdings drop below 5%. The SEC also proposed new Rule 10B-1 under the Exchange Act[30] in December 2021 in order to require any person with large notional positions[31] in credit default swaps, other swaps based on debt securities, or swaps based on equity securities to file reports with the SEC that disclose each security-based swap position and any related position in the reference debt or equity security, loan or narrow-based security index underlying the security-based swap. For example, investment advisers (whether or not they are registered), broker-dealers, banks, trustees, and insurance companies are all institutional investment managers. We respectfully submit this letter in opposition to the Obligations of a Firms Control Persons. For example, the sale of a warrant to purchase common stock of a public company would be matched with any purchase of the common stock of that public company occurring within six months for purposes of determining short-swing profits under Section 16(b). The SEC was created in the 1930s with an aim to curb stock manipulation and fraud that was taking place among companies. Loans made in the ordinary course of business at market rates by issuers that are financial institutions or in the business of consumer lending are excepted from the prohibition. This legal update summarizes (a) the reporting requirements under Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are generally applicable to persons that own, or exercise investment discretion over accounts that own, publicly traded or exchange-listed equity securities, [1] and (b) the reporting requirements under Section 16 of the Exchange Act . The requirement was adopted in August as part of . The direct and indirect beneficial owners of the same Section 13(d) Securities may satisfy their reporting obligations by making a joint Schedule13D or Schedule 13G filing, provided that: Initial filings. All of this information must be filed electronically with the SEC through its EDGAR system, and will immediately become publicly available upon filing. On November 2, 2022, the SEC adopted Rule 14Ad-1 under the Exchange Act that will require any manager to annually report its proxy voting record with respect to the securities of any public company over which it exercises voting power[18] regarding the shareholder advisory votes on (a) the compensation paid to the public companys executives, (b) the frequency of the executive compensation approval votes, and (c) any so-called golden parachute arrangements in connection with a merger or acquisition (collectively, say-on-pay votes). A reporting person may use the less burdensome Schedule 13G if it meets certain criteria described below. In calculating the number of holders of record for purposes of determining whether Exchange Act registration is required, your company may exclude persons who acquired their securities in an exempt offering: Public float is calculated by multiplying the number of the companys common shares held by non-affiliates by the market price and, in the case of an IPO, adding to that number the product obtained by multiplying the common shares covered by the registration statement by their estimated public offering price. Rule 13h-1 under the Exchange Act requires a Form 13H to be filed with the SEC by any individual or entity (each, a Large Trader) that, directly or indirectly, exercises investment discretion over one or more accounts and effects transactions in NMS Securities (as defined below) for those accounts through one or more registered broker-dealers that, in the aggregate, equal or exceed (a) 2 million shares or $20million in fair market value during any calendar day, or (b) 20 million shares or $200 million in fair market value during any calendar month (each, an identifying activity level). beneficially owns, in the aggregate, more than 5% of a class of the voting, equity securities (the Section 13(d) Securities): issued by any closed-end investment company registered under the Investment Company Act of 1940, as amended (the Investment Company Act), or, issued by any insurance company that would have been required to register its securities under Section 12 of the Exchange Act but for the exemption under Section 12(g)(2)(G) thereof (see, manages discretionary accounts that, in the aggregate, hold equity securities trading on a national securities exchange with an aggregate fair market value of $100 million or more (see, securities and standardized options) in an aggregate amount equal to or greater than (a) 2 million shares or shares with a fair market value of more than $20 million during a day, or (b) 20 million shares or shares with a fair market value of more than $200 million during a calendar month (see, Significant Acquisitions and Ownership Positions, any general partner, managing member, trustee, or controlling shareholder of the firm; and. 6LinkedIn 8 Email Updates, Compliance Guide: Changes to Exchange Act Registration Requirements to Implement Title V and Title VI of the JOBS Act, Compliance Guide: Interactive Data for Financial Reporting, Press Release: SEC Adopts Amendments to Implement JOBS Act and FAST Act Changes for Exchange Act Registration Requirements, JOBS Act FAQs: Changes to the Requirements for Exchange Act Registration and Deregistration, Sarbanes-Oxley Section 404: A Guide for Small Business. However, Section 929R of the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated that obligation. Public companies are a key part of the American economy. [10]See Question 103.07 (September 14, 2009), Regulation 13D-G C&DIs. Requirements for Schedule 13D Schedule 13D requires that the beneficial owner provide relevant information about several items, which include the following: Item 1: Security and Issuer. In order to avoid duplicative reporting of the same Section 13(f) Security, the reporting managers must arrange to file one of the three different types of Form 13F. If there has been any material change to the information in a Schedule 13D previously filed by a reporting person,[11] the person must promptly file an amendment to such Schedule 13D. Limited exemptions exist for transactions that do not need to be reported on Form 4, including the acquisition of a portfolio companys equity securities not exceeding $10,000, subject to specified conditions (the Small Acquisitions Exemption). However, only a reporting person that was originally eligible to file a Schedule 13G and was later required to file a Schedule 13D may switch back to reporting on Schedule 13G.[10]. [14] Section 13(f)(6)(A) of the Exchange Act defines the term institutional investment manager to include any person (other than a natural person) investing in, or buying and selling, securities for its own account, and any person (including a natural person) exercising investment discretion with respect to the account of any other person (including any private or registered fund). Form N-PX will allow reporting managers that have a disclosed policy of not voting proxies and that did not vote during the reporting period to indicate this on the form without providing additional information about each voting matter. Rule 10b5-1, originally enacted in 2000, enables insiders of publicly listed companies to sell a predetermined number of shares at a . [11]This includes a change in the previously reported ownership percentage of a reporting person even if such change results solely from an increase or decrease in the aggregate number of outstanding securities of the issuer. Switching from Schedule 13G to Schedule 13D. across all major Western European equity markets. Please research the equivalent of the SEC large shareholder reporting requirements (13Ds, etc.) The information is, however, subject to disclosure to Congress and other federal agencies and when ordered by a court. Schedule 13D must be amended promptly to reflect any material changes in the information provided. When beneficial ownership of a Passive Investor exceeds 10%, Promptly after the triggering transaction, 2. While not set out in Section 16 or the rules thereunder, the concept of deputization has been found by the courts where a securities firm is acting as a director of a public company through its deputy and (a) the director shares confidential information with the firm, (b) the director influences the firms investment decisions with respect to the public company, or (c) the directors actions as a director are influenced by the firm. Section 16: Reports of Directors, Officers, and Principal Shareholders. Provide updated disclosure on previously disclosed cybersecurity incidents in 10-Ks and 10-Qs. Availability of Joint Filings by Reporting Persons. To avoid a short-swing profits violation, before entering into a transaction involving any covered securities (including any exercise of a derivative security), an insider should look back six months to determine if any prior sale or purchase can be matched with the proposed transaction and would result in the realization of any profit. The term Qualified Institution also includes a non-U.S. institution that is the functional equivalent of any of the foregoing entities and the control persons and parent holding companies of an entity that qualifies as a Qualified Institution. For example, a person that acquired all of its Section 13(d) Securities prior to the issuers registration of such securities (or class of securities) under the Exchange Act, or acquired no more than 2% of the Section 13(d) Securities within a 12-month period, is considered to be an Exempt Investor and would be eligible to file reports on Schedule13G. [21] These requirements seek to discourage insiders from profiting on the basis of the superior information that may be accessible to them because of their influential role in the public company. For example, if a private fund that beneficially owns more than 5% of a class of an issuers Section 13(d) Securities is managed by a securities firm that is a limited partnership, the general partner of which is an LLC that in turn is owned in roughly equal proportions by two managing members, then each of the private fund, the securities firm, the firms general partner, and the two managing members of the general partner likely will have an independent Section 13 reporting obligation. Sections 13(d) and 13(g) of the Exchange Act require any person or group of persons[2] who directly or indirectly acquires or has beneficial ownership[3] of more than 5% of a class of an issuers Section 13(d) Securities (the 5% threshold) to report such beneficial ownership on Schedule 13D or Schedule 13G, as appropriate. However, it is possible that a reporting obligation may arise if the fund itself actually engages in the investment decision-making process (such as through an internal investment committee whose decisions bind the institutional investment manager). This summary should include disclosure thresholds, tender . On September 25, 2018, the SEC staff issued guidance on compliance with the new requirement to present changes in shareholders' equity in interim financial statements within Form 10-Q filings. Otherwise, each Large Trader in the organization will be required to file a separate Form 13H. Please contact us if you require any assistance in seeking confidential treatment of your Form 13F filing. [1] Importantly, with respect to Section 13(d) Securities, a person is deemed to beneficially own the applicable securities if the person has the right to acquire the securities within 60 days of the reporting date, including (a) through the exercise of any option, warrant or right; (b) through the conversion of a security; (c) through the power to revoke a trust, discretionary account, or similar arrangement; or (d) upon the automatic termination of a trust, discretionary account, or similar arrangement. [21] Insiders of a registered closed-end fund are subject to substantially similar requirements under Section 30(h) of the Investment Company Act of 1940, as amended. These reports require much of the same information about the company as is required in a registration statement for a public offering. A profit interest may exist as the result of any contract, arrangement, understanding, or relationship that the insider may have with another person or organization. Form 13H requires that a Large Trader, reporting for itself and for any affiliate that exercises investment discretion over NMS securities, list the broker-dealers at which the Large Trader and its affiliates have accounts and designate each broker-dealer as a prime broker, an executing broker, and/or a clearing broker. Form 13H filings with the SEC are confidential and exempt from disclosure under the United States Freedom of Information Act. If your firm beneficially owns more than 10% of a class of Section 13(d) Securities and is not aware of these possible obligations, please contact us. [17] A reporting manager must file Form 13F (i) within 45 days after the last day of each calendar year in which it meets the $100 million threshold, and (ii) within 45 days after the last day of each of the first three calendar quarters of the following calendar year. The instructions for the reports will encourage the use of graphics and text features to make them more effective. "Material" cybersecurity incident would have to be reported on a Form 8-K within four business days of it being determined to be material. Section 16 also establishes mechanisms for a company to recover "short swing" profits, or profits an insider realizes from a purchase and sale of the companys security that occur within a six-month period. An agreement to act together does not need to be in writing and may be inferred by the SEC or a court from the concerted actions or common objective of the group members. The required reports include an annual Form 10-K, quarterly Form 10Q's and current periodic Form 8-K as well as proxy reports and certain shareholder and affiliate reporting requirements. Schedule 13D must be filed within 10 days of crossing the 5% ownership threshold. You are required to retain a manually signed hard copy of all EDGAR filings (and related documents like powers of attorney) in your records available for SEC inspection for a period of five years after the date of filing. This is among the reasons that board disclosure and accountability have become increasingly critical aspects of good governance. See definition in Footnote 3 above and accompanying text. Positions of Investment Managers with More than $100Million in Discretionary Accounts, Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts, of Directors, Officers, and Principal Shareholders, at the time of the registration of the companys equity, https://www.filermanagement.edgarfiling.sec.gov, https://www.sec.gov/rules/proposed/2022/33-11030.pdf, http://www.sec.gov/divisions/investment/13flists.htm, https://www.sec.gov/rules/proposed/2022/34-94313.pdf, https://www.sec.gov/rules/proposed/2021/34-93784.pdf, Corporate (Private Equity, Fusions & Acquisitions, Marchs de Capitaux), International Regulatory Enforcement (PHIRE), Consolidated Appropriations Act, 2021(CAA) Machine Readable Files, registered under Section 12 of the Exchange Act, manages discretionary accounts that, in the aggregate, purchase or sell any NMS securities (generally exchange-listed equity. Insiders: Officers, Directors, and 10% Beneficial Owners. In calculating the amount of the disgorgement, an insider is required to pay the excess of (a) the highest sales price per share, over (b) the lowest purchase price per share, with respect to the covered securities involved in the matching transactions made within the six-month period. [5]Under Rule 13d-1, a reporting person also qualifies as a Qualified Institution if it is a bank as defined in Section 3(a)(6) of the Exchange Act, an insurance company as defined in Section 3(a)(19) of the Exchange Act, an investment company registered under the Investment Company Act, or an employee benefit plan, savings association, or church plan. The time frame depends on whether the issuing company is subject to reporting requirements under the Securities Exchange Act of 1934. entry into and termination of a material definitive agreement (a copy of the agreement must also be publicly filed); completion of an acquisition or disposition of assets, notice of a delisting or failure to satisfy a continued listing rule or standard or transfer of listing, material modifications to rights of security holders, changes in your company's certifying accountant, election of directors, appointment of principal officers, and departure of directors and principal officersand, it has more than $10 million in total assets and a class of equity securities, like common stock, that is held of record by either (1) 2,000 or more persons or (2) 500 or more persons who are not accredited investorsor, it lists the securities on a U.S. exchange, is current in its ongoing annual reports required pursuant to, has total assets as of the end of its last fiscal year not in excess of $25 millionand, has engaged the services of a transfer agent registered with the Commission pursuant to Section 17A of the Exchange Actor, is required to file and is current in filing annual, semiannual and special financial reports under Securities Act Rule 257(b), had a public float of less than $75 million as of the end of its last semiannual period, or if it cannot calculate its public float, had less than $50 million in annual revenue as of the end of its last fiscal year and, engaged a transfer agent registered pursuant to Section 17A of the Exchange Act. A reporting person who is not eligible to use Schedule 13G must file a Schedule13D within 10 days of such reporting persons direct or indirect acquisition of beneficial ownership of more than 5% of a class of an issuers Section 13(d) Securities. [2]A group is defined in Rule 13d-5 as two or more persons [that] agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer. See, for example, the persons described above in Reporting Obligations of Control Persons.
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